Criteria: Proper internal controls should be in place to ensure ASB funds are properly collected, deposited and expended as part of the District’s fiduciary duty. In addition, adequate internal controls will ensure that fiduciary fund assets are safeguarded.
Condition: Sites listed and detailed below were determined to be lacking proper internal controls and audit documentation relating to budgeting, cash disbursements, and/or cash receipts. The deficiencies in internal controls noted include the following:
Oak Valley Middle School
Through inquiry, auditor noted that no annual budget is prepared or adopted by the student governing body.
Two (2) of ten disbursements selected for testing appeared to be questionable as to appropriate use of student body funds.
Two (2) of ten cash receipts selections noted instances where teachers and/or volunteers were collecting cash/checks and did not give receipts, hence there is no clear audit trail to determine the amounts received.
Three (3) of ten cash receipts selections noted instances in which sales of goods tally/control sheets should have been used to substantiate and reconcile the proceeds collected and subsequently deposited.
Westview High School
Upon inquiry, auditor found that the finance office does not retain copies of deposited checks. In addition, auditor noted through inquiry that concessions and other fundraising activities do not consistently use tally and/or control sheets to reconcile proceeds collected to amount subsequently deposited.
Del Norte High School
Upon inquiry, auditor found that there is not an inventory count being done for the campus student store, or the amounts sold as concessions at events.
Recommendation: We recommend that staff members who handle student funds be reminded of the importance of sound internal controls, proper documentation over cash receipts and the proper approval of expenditures. Instruction on the use of standardized formats should continue to be provided annually with compliance follow-up by the district office. The District should provide each student body account clerk with the latest FCMAT Associated Student Body Accounting Manual & Desk Reference and reinforce the importance for sound internal control procedures to be implemented. Proper controls over cash receipting and cash disbursements are integral for proper safeguarding of assets.
District Response
Oak Valley Middle School (OVMS)
On learning of the audit finding regarding the required annual budget, the Principal stated that the school will be complying with the requirement of preparing the annual budget to be adopted by the student
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governing body. Finance department will continue to work with OVMS to make sure they comply with the required adopted annual budget duly approved by the student body and reviewed by the ASB advisor. Upon request for the details of the questionable disbursements from the auditor, we learned that the disbursements were related to a PE conference and PE supplies paid by the ASB PE trust account. As verified with FCMAT help desk on the eligibility of PE clothes and PE fundraising under ASB trust, their response is:
“If PE clothing is identified as an item to be sold in the student store, or has been identified as an ASB
fundraising activity (outside of a student store), then the proceeds of sales belong to the students to support their activities and should be accounted for in the ASB accounts.”
In conformity with the Fiscal Crisis & Management Assistance Team (FCMAT) guidance, the District will document the approval allowing the PE donations, PE clothes sales and PE fundraising for the middle schools to be included in ASB as a club/trust account provided that they meet the requirements for setting up a club/trust, including approval of the budget. The schools are aware that the PE club/trust account should comply with the District-wide policy on disbursements’ documentations and approval as well as proper documentation for the receipt of funds or sales.
Finance department updated the existing internal control for cash receipts as a result of the audit findings. A copy of the ASB Internal Control Procedures for Cash Receipts was provided to the auditor and has been shared with school sites.
Westview High School (WHS)
Retaining copies of deposited checks to allow auditors to obtain and review adequate supporting documentation in detail and to help verify the revenue source of cash receipts will not work for our district. Finance department believes that the copying of checks would not provide sufficient control to capture the total sales/collections aside from being time consuming. On the average fundraising week or major event, checks collected could range from 300 to 500. Photocopying will be impractical for the school sites. We will instead reinforce the existing internal control procedures that are in place and in compliance with FCMAT ASB Accounting Manual.
The ASB Internal Control Procedures will cover the specific sale documents to ensure that all sales are properly accounted and recorded. The school will make sure that all receipts must be supported by proof of sales.
For event concessions, an inventory count of items to be sold before and after the event to account for the items sold will be implemented. This will be used to reconcile sales against the cash collected and to be included in the Cash Verification Form (CVF).
Del Norte High School (DNHS)
It has been a practice of DNHS to maintain minimal inventory level at the end of the school year. The school only sells food items in the student store. Since these are consumable items with a very short shelf life, they donate all the left over inventory, resulting in a zero balance at year end.
Finance department will require the school to provide documentation of the donated student store inventory items with the approval of the student body and reviewed by the ASB Advisor.
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4 Overall, the District will continue to remind sites of the ASB policy and procedures, particularly on the internal control for cash receipts and disbursements in accordance with FCMAT ASB Accounting Manual. Finance department will continue periodic visits to school sites to conduct internal audit and review to ascertain the sites’ strict compliance with the ASB policy and procedures.
The Annual ASB workshop will be conducted by the Finance department to reinforce the ASB internal control procedures. Finance Staff will attend the CASBO workshop to obtain updated knowledge in handling the ASB and share the information with the school site staff handling ASB finances. School site staff will also be encouraged to attend the CASBO workshop.
FINDING #2014‐02: INTERNAL CONTROLS OVER TRANSPORTATION DEPARTMENT’S CASH